Rent or Buy: Tips for Answering the Homeownership Question for Yourself

RENT OR BUY: TIPS FOR ANSWERING THE HOMEOWNERSHIP QUESTION FOR YOURSELF

Attitudes towards home ownership can vary between different parts of the world, but when given a choice, many have aspirations of getting onto the property ladder and owning a house that they call truly call home.

If you search online at www.Bairstoweves.co.uk for example, you will find plenty of properties which many of us would like to own, so you need to ask yourself a few critical questions and try to decide if you should rent or buy.

Fewer owner-occupiers

If you take a look at home ownership figures in Britain as an example, roughly 65% of households are classified as owner-occupiers, but that percentage rate is dwindling rather than climbing.

Another 25 years from now (when a typical mortgage term would have expired), the number of property owners is expected to have fallen to closer to 50%, so it seems to suggest that there is a generation that has either settled for renting or have found it difficult to get that vital first foot on the property ladder.

For those that are part of what is being termed by some as Generation-Rent, there seems to be a shift in attitudes as well as a tightening of lending criteria, which is preventing some from owning their own home even if they want to.

The number of Germans who own their own home is around 45%, and that is largely a prosperous economy where it seems renting is not viewed as a poor relation to ownership.

There are definitely barriers that you need to overcome in order to own your own property, such as having a cash deposit and earning enough money to qualify for a mortgage, but there are pros and cons to both options, so would you prefer to rent or buy?

Putting down roots

Many of us have life goals such as getting married, starting a family and owning their own home.

One of the advantages to home ownership that is always worth mentioning is the fact that when you buy as opposed to renting a property, you do get the opportunity to feel more settled and more connected to your community.

Renting can often make you perhaps feel that you are not as involved in your local community and part of the neighborhood that bonds so many villages and areas together, as you would be if you have taken a stake in a property and put down roots where you can integrate and create a network of friends.

We are all different of course, but there is an increased chance that you will have a greater vested interest in your community if you are an owner.

Improve your financial situation

You might consider that buying a property and having to pay a mortgage which includes interest payments, is not necessarily conducive towards improving your financial situation, but there are definitely benefits to home ownership, which includes improving your credit rating and easier access to further borrowing.

When you are a homeowner you have the option of building up some equity in your property, which could allow the opportunity to borrow some more money against your property if you need it, by topping up your mortgage amount. Also after you have lived in your home long enough, you might want to look into a reverse mortgage. A handy tool to help with that is the reverse mortgage calculator

The other significant point about your financial standing is the fact that once you own your own home and are paying a mortgage every month, this will often help to boost your credit rating.

Being able to demonstrate financial responsibility and make payments on time will often be reflected in your credit rating, which means that you may potentially find it easier to get a loan for a car or some other purpose, than if you were a tenant. 

Increased wealth

Negative equity can and does happen to some homeowners, who buy a property when prices are rising and then suffer a drop in the value if there is an adjustment.

You need to always appreciate that home ownership is not a one-way ticket to increasing your wealth through the value of your home, but from a historical perspective, if you own your home for a reasonable period of time, there is every chance that it will end up being worth more than you paid for it.

The best policy is often to buy a property that you want to live in first and foremost, and if the value rises quicker than you anticipated, that would be a nice bonus and reaffirm that your decision to buy rather than rent was a good one.

Home ownership can unlock plenty of benefits, so weigh up your options and your financial situation to see whether it would be better for you to rent or buy if you have the choice.

[info_box type=”pale_box”]Ella Webster has a background in property but is now taking a career break to raise her young family. She still likes to keep abreast of changes in the market, though and writes property related articles several times a month for publication online.[/info_box]

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One Comment

  1. As the market stands today, property will always be a strong investment, negative equity becomes a risk only if you plan to sell on in a short space of time and not do any work to the property. If you plan to hang on to a property for a longer period or add value by investing in the property itself then buying will always leave you in positive equity more than not.

    Secondly in terms of finance, in the end buying is always more cost effective than renting forever, and you have home ownership as collateral in the future.

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